Australian real estate investment trusts (REITs) returned 15.6 per cent over the 12-month period, with global REITs returning 4.2 per cent, according to the Zenith 2016 Property Sector Review.

Zenith senior investment analyst Sophie Gibbons noted that Australian REITs (A-REITs) are increasingly including developers and contractors, as well as infrastructure and small caps, in their strategies.

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“We have observed a greater willingness of AREIT-sector participants to use the full breadth of their investment mandates this year, largely in an effort to generate excess returns,” she said.

Ms Gibbons warned this could have an effect on the qualities of REITs as an asset class.

“Investors need to be aware that these exposures can potentially provide a more varied set of investment outcomes that may not directly reflect the defensive nature of the asset class, thereby impacting total portfolio outcomes,” she said.

Zenith also found that “distortions brought by central bank policy, valuations and issues with benchmark composition” have made it “incrementally challenging to generate excess returns”, as evidenced by the varied investment outcomes identified in the review.